Market Psychology

AAA

DEFINITION of 'Market Psychology'

The overall sentiment or feeling that the market is experiencing at any particular time. Greed, fear, expectations and circumstances are all factors that contribute to the group's overall investing mentality or sentiment.

INVESTOPEDIA EXPLAINS 'Market Psychology'

While conventional financial theory describes situations in which all the players in the market behave rationally, not accounting for the emotional aspect of the market can sometimes lead to unexpected outcomes that can't be predicted by simply looking at the fundamentals.

Technical analysts use trends, patterns and other indicators to assess the market's current psychological state in order to predict whether the market is heading in an upward or downward direction.

RELATED TERMS
  1. George Bailey Effect

    A feeling of increased gratefulness for what one has upon considering ...
  2. Barcode

    A graphical representation of a product's identifying information ...
  3. Bandwagon Effect

    A psychological phenomenon whereby people do something primarily ...
  4. Kiasu

    A Chinese adjective used to describe a person's fear of losing ...
  5. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  6. Market Sentiment

    The overall attitude of investors toward a particular security ...
Related Articles
  1. Active Trading Fundamentals

    4 Psychological Traps That Are Killing Your Portfolio

    Sometimes your largest financial hurdle is our head. Learn about the common mind-traps that trip up investors.
  2. Fundamental Analysis

    Andre Kostolany: Germany's Stock Market Guru

    We can learn a lot from Kostolany and his "steady or shaky hand" investing philosophy.
  3. Investing Basics

    The Intelligent Investor: Benjamin Graham

    Learn about the man who mentored Warren Buffett, who eventually became the investing "Oracle of Omaha".
  4. Active Trading Fundamentals

    An Introduction To Behavioral Finance

    Curious about how emotions and biases affect the market? Find some useful insight here.
  5. Markets

    Market Mentalities: Bulls Vs. Bears

    Learn the importance of these opposing views on investing in the markets.
  6. Active Trading Fundamentals

    How The Power Of The Masses Drives The Market

    Market psychology is an undeniably powerful force. Find out what you can do about it.
  7. Options & Futures

    How To Read The Market's Psychological State

    Discover what on-balance volume, accumulation/distribution and open interest can tell you about the market mood.
  8. Active Trading Fundamentals

    Brains Don't Always Bring The Bucks

    Common mistakes can prevent even the smartest investors from beating the market.
  9. Personal Finance

    Investing "Road Less Traveled" May Lead To Riches

    Using the same strategy year after year may be comfortable, but it's not always profitable.
  10. Trading Strategies

    Basics Of Technical Analysis

    Learn how chartists analyze the price movements of the market. We'll introduce you to the most important concepts in this approach.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center